​STAGE II

The following are extracts from your Notebook which you have highlighted as of importance to you. There is of course a lot more than this but you have weeded it out. ​

​EXTRACTS FROM THE ARBITRATOR'S NOTE BOOK

Although pursuant to the agreed Directions, only witnesses whose written statements had been served 14 days before the hearing were to be allowed to give evidence, 1 was asked by the Claimant to allow evidence by En.Mohd.Hassan who had not served a statement. I was informed that En. Hassan had come to the hearing after service on him of a subpoena_ He was a former employee of the Respondent and did not give evidence willingly.

The Respondent's counsel opposed the Claimant's application and demanded at least an outline of what En.Hassan would say. Counsel for the Claimant said that this was not possible: he did not know what En.Hassan would say. After argument for about half an hour, the Respondent's counsel agreed that the evidence should be given 'de bene esse' and that I should indicate in my Award how much weight should be given to En.Hassan's evidence.

• De bene esse means to act provisionally or in anticipation of a future occasion: to take evidence for future use while it is available'. ​

​In his opening speech for the Claimant, Mr Zakaria laid great stress on fitness for purpose. The Respondent had been a firm specialising in design matters and held themselves out as experts in that respect. They had been told of the purpose to which the rooms would be put. Proof of their breach of the implied terms of their contract was the distress to which the participants of the first arbitration had been put. ​

In cross examination Mr Fairuz was less than wholly convincing that he had spelled out the Claimant's requirements in his meetings with Mr Ghani. Mr Fairuz obviously had a good idea of the atmosphere at an arbitration meeting. However, it was doubtful if he had conveyed this to Mr.Ghani.

The size of table in the arbitration room was a case in point. While it was clear that he had made known the requirement for twelve chairs at the table, it appeared unlikely that he had made known the amount of space at the table needed to accommodate plans and documents. He was unable to say whether any dimensions for the table had been discussed.

At the partners' meeting the Respondent's presentation consisted only of a board about 600 mm square on which were stuck tiny samples of the carpet, curtains, chair fabric and wallpapers, There was a small photograph of a chair on the board and a slither of plywood veneer to show the wood to be used on the table. Mr Fairuz was unable (in cross-examination) to explain why the two junior partners (out of ten partners at the meeting) had so much influence on the day.

He was unable to throw any light on the discussions following the adjournment of the arbitration. In particular he seemed to be evasive when 'asked if there was any agreement that T.Kassim Interior Designs Ltd should be paid for the replacement table or wallpaper.

Fn Mohd.Hassan said that he had been T.Kassim's buyer at the time of this contract When the budget price had to be reduced below RM 30.000 plus Govt tax. He and Ghani had decided to purchase a smaller table for the main arbitration room than had been intended. There was a particular table which they could purchase economically which would seat twelve although they knew at the time that seating arrangements would be tight.

The new table was 300 mm shorter than the original choice. The wallpaper for the waiting-room was used because they had a surplus stock from another job (an Indian restaurant as it happened). As to the fleur-de-lys paper, he had known problems with eye-strain on other jobs. Where used in large spaces there had been no trouble, but they had been asked to remove it from the rooms where hotels had put on training courses. Cross-examined on this point he was unable to say at which hotel this had occurred. ​

Ghani said that at the first meeting he had shown Fairuz photographs of completed schemes carried out by his company_ Some of these had used the wallpapers subsequently adopted for this project, He recalled that he had also taken some brochures of tables although he was unable to say whether they were tables which were then specified. He had shown Fairuz samples of carpet but not wallpaper or curtains. ​

​In his closing speech Mr-FY Chan for the Respondent, said that everything that had been supplied was with the express approval of the Claimant. The question of the design of the wallpapers was a matter of subjective judgment. His clients had made recommendations only; it was impossible for the decorators to look into the minds of the Claimant company.

Fitness for purpose was not a real issue here_ This was not a case such as IBA v & B/CC. where the Respondent knew the purpose for which the works were required. Here there was no specification as such. While the Respondents were experienced designers, their skill was limited to aesthetic assessment. There was no complaint that the wallpapers were unattractive; only that they did not measure up to the Claimant's expectations of an image which only they knew they sought to attain. There was no warranty nor could there be in law, as to fitness for purpose. This was not a case of defective material, nor could it be said that the work had been carried out negligently. Nor was there any misrepresentation or mis-statement as in the 18A case.​As to the losses said to have been incurred, no-one could have foreseen the effect of visual images on a commercial enterprise. The procedure in arbitration was apparently unusual. It was not as though the Claimant had instructed the Respondents to design a court-room, nor was it clear that an arbitrator had to be clothed with some special image which was remote from that of a judge. A judge relied on his position (and perhaps his wig and robes) to convey the impression of authority. A judge did not rely on the colour of the wallpaper in his rooms: and the Respondents could not be expected to second guess any such effect..; It followed that it was not necessary to hold up or delay the arbitration proceedings. The Claimant should have been alive to the possibility of any physical reaction to the surrounding ambience and should have instructed the Respondent accordingly. Any damage which followed was too remote. It could not have been foreseen by the Respondents, nor, In any case, did the Claimant take any steps to mitigate any losses which might have been actually incurred. Accordingly the claim had no real foundation and the arbitrator was invited to dismiss it

Claimant's Closing Address

​Mr.Zakana's closing address concentrated on the IBA case and its forerunner Ganasen v Bayau in the earlier case where the House of Lords had drawn a distinction between a term which is said to be implied by law and a term which is to be implied in fact. Despite that distinction here, as in Ganasen, the evidence shows that both parties were of one mind on the subject of their contract: their common intention was that the Respondent should design a series of rooms which would be fit for the purpose for which they were required. The common intention gave rise to a term implied in fact.

Equally in IBA, the House of Lords had found that EMI had a contractual duty for the design of the mast. Although EMI had no specialist knowledge of mast design, and IBA knew that and did not rely on their skill to any extent for the design, there was nothing unreasonable in holding EMI responsible for the design. Thus here, although the Respondent had no specialist knowledge of the design of arbitration rooms, there is nothing unreasonable in holding them responsible for the design. It is quite clear that, in Malaysian law, where a particular purpose is made known to the designer, he (the designer) has an obligation to produce a design that is fit for that particular purpose, and that is so whether or not there is negligence.

In fact the evidence showed that the special requirements of the Claimant had been conveyed to the Respondents. The Respondents had a duty to ensure that the designs would be fit for their purpose. It was unsatisfactory for the Respondents to make no research into, or inquiries about what happened in arbitrations. It would have been clear to them that they were not designing a fish and chip parlour, or a hotel. There were distinct criteria that had to be applied in this case.

With that in mind it is clear that the losses were foreseeable. Whatever the rooms were to be used for it must have been in the Respondent's minds, if they stopped to think about it, that any business use, if hindered, would carry financial consequences. Again it was a case that the Respondent should have made enquiries about the financial effect of interference with the use of the rooms.​The question of the size of the table had not been addressed by the Respondent. Here was a clear example of the Respondent's casual approach to the task. On any standard it was obvious that the Respondent should have known that a table that was too small would have dire effects on the use of the rooms. The reduction in the overall budget was no excuse for choosing a smaller table. The space required at the table was crucial to the scheme, and the Respondent knew it. On this aspect of the case the Respondent had come close to negligence.

​All in all, the Respondent's work had proved to be virtually useless and the Claimant was entitled to compensation.